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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Times interest earned

A company reports the following:

Income before income tax $4,000,000
Interest expense 400,000

Determine the times interest earned ratio. Round to one decimal place.

To determine
Times interest earned ratio

Given info: Income before income tax and interest expense.

Explanation

Times interest earned ratio quantifies the number of times the earnings before interest and taxes can pay the interest expense. First, determine the sum of income before income tax and interest expense. Then, divide the sum by interest expense.

Formula:

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